Everything you need to know about investing in cryptocurrencies beyond Bitcoin and ETH

When it comes to cryptocurrencies, everyone thinks of Bitcoin. In fact, Bitcoin is much better known than the term “cryptocurrency” itself. Since its inception, the concept of a decentralized financial system has taken everyone by surprise. Many extraordinary things have happened in this area to date, although they have been in development for a little over a decade.

As the understanding of cryptocurrencies increased and more people joined in, hundreds and thousands of new cryptocurrencies began to “sprout like mushrooms”. Some of them failed miserably while many others succeeded and became one of the best digital assets today. With this rapid development, of course, people have quickly invested in these digital assets and created a new type of investment vehicle.

But there are always a few questions about crypto: Are Bitcoin and a handful of Altcoins the only investment options? Is DeFi really worth it …?

To answer this question, the article will show why Bitcoin and Altcoins are not the only and last option. Instead, they are the beginning of a new world of investing.

Types of telectronic money

If you want to know where to invest, it is important to evaluate every available digital currency and of course analyze the top coins. The main reason people flock to invest in crypto is because of the “incredible” ROI these assets bring.

Over the past year, Bitcoin price has increased nearly 77%, with the 1-year ROI at press time around 161%. In the meantime, the market slump on December 4th has certainly resulted in the king of cryptocurrencies and other altcoins falling significantly. In fact, Bitcoin hit a low of $ 43,000.

However, if you are wondering why the ROI of BTC is so low, it is because Bitcoin is still trading at a high price of $ 49,000. Its up and down movements continue to maintain a tight structure and keep volatility relatively low.

Bitcoin price chart since the beginning of the year | Source: TradingView

In contrast, altcoins that did not have a high price turned out to be “unthinkable” this year. ETH does really well as the price is up 501.8% and has a 620% ROI at the time of writing. However, that is nothing compared to the strongest coin of 2021 – SOL.

SOL made a breakthrough in this year’s market after the price rose 13,292% from $ 1.50 to its current level of $ 188.

SOL price chart from the beginning of the year until now | Source: TradingView

The ROI of this altcoin is a staggering 10.976%, making it the most profitable asset of the year.

Coins like ADA and XRP also didn’t disappoint, with gains of 793% and 290% and returns of 789% and 32.8%, respectively.

1 year ROI comparison | Source: Coinmetrics

Explosive DeFi also plays an important role in adding value.

On the other hand, these cryptocurrencies have also received a lot of criticism, mainly due to their volatility, which many organizations vehemently reject. The legal battle between the US Securities and Exchange Commission and Ripple Labs is a prime example.

After that, the ban on cryptocurrency mining and trading in China caused a lot of waves. It hit the entire market hard and took several weeks to recover. Next up, the FUD (Fear, Uncertainty, Doubt) of India’s proposed cryptocurrency law and its contents also caused a stir in the country’s massive digital currency community.

In addition, volatility is also a concern of many investors.

According to a recent CoinShares survey, the biggest problem for investors is volatility, not regulation and accessibility.

Top Investor Concerns About Cryptocurrency Investing | Source: CoinShares

Also, most crypto investments are still born out of a “get rich quick” mentality rather than the use cases of the underlying technology that underlies them.

This has led people to consider other forms of crypto investments.

Cryptocurrency company

There are many blockchain companies that focus on mining for income generation and also trading on traditional exchanges but are backed by cryptocurrencies. Some famous examples are HIVE Blockchain Technologies Ltd., Galaxy Digital, Bitfarms … which all mine cryptocurrencies. As a result, her population grew successfully over the course of the year.

This increase is even comparable to the largest growth in the top cryptocurrencies. HIVE offers 1575% ROI, BITF (Bitfarms) promises 1.166% return and GLXY from Galaxy Digital offers 369% return on investment.

ROI from HIVE Blockchain Technologies Ltd. | Source: Blockchain

In addition to established companies, there are also cases of crypto-based companies that use the SPAC (Special Purpose Acquisition Company) approach in planning and raising capital as well as converting into a public company. As a current example, Prime Blockchain has over 10,300 BTC mining rigs and 2,600 ETH mining rigs. They merged with 10X Capital Venture for a combined post-merger value of nearly $ 1.5 billion.

However, people still want to feel the heat of the cryptocurrency but need to have the security of the traditional investment path. This has created a demand for a crypto-based Exchange Traded Product (ETP).

product Convert Cryptocurrency-based trading

ETPs, including Exchange Traded Funds (ETFs), ETN Securities … have always drawn investor attention over the years. This year, demand for ETFs peaked, and investors really got what they wanted when the ProShares Bitcoin ETF (BITO) launched on October 19 amid a spate of litigation between the SEC and Ripple.

ETFs are so popular right now because a) they are SEC approved and therefore not prohibited by law, b) it is easier to buy an ETF than real cryptocurrency, and c) tax refunds on policies. In fact, ETFs only generate a taxable event when they are sold.

In addition, these ETFs generate long-term capital gains (if the holding period is longer than one year) or short-term capital gains (if the holding period is less than a year) based on the holding period.

In terms of convenience of purchase and tax benefits, GBTC is equally important due to its 401,000 tax break. However, GBTC is not considered an ETF. Since it is based on trust, it qualifies as a regulated company. This resulted in GBTC having a limited number of shares. With $ 37 billion (AUM) of assets under management, it is arguably the largest crypto-backed investment vehicle on the market.

Grayscale Bitcoin AUM | Source: grayscale

But even the ETF hype has subsided, as the entire market underperformed in November. In the first week after BITO launched, ETFs brought in inflows worth nearly $ 1.46 billion. That number is down 79% this week to $ 305 million.

Weekly capital inflows into ETFs (as of November 26) | Source: CoinShares

but not all…

Traditional investment vehicles have taken advantage of the cryptocurrency hype to propel themselves. Famous companies like Tesla, Square Inc., and MicroStrategy are constantly accumulating Bitcoin and other altcoins to attract investors to their stocks.

Surprisingly, they paid off. All of these companies have seen incredible growth this year. In fact, MicroStrategy is currently the largest Bitcoin holder in the world and has amassed 121,044 BTC in almost a year.

The real purpose of cryptocurrencies …

However, it should be remembered that the real purpose of cryptocurrencies is decentralization. Bitcoin was created with a mission to decentralize money and the advances made over the past 13 years are slowly making it a reality. Cryptocurrency companies, ETPs and traditional investment vehicles powered by a crypto hype are proof that we are still a long way from that.

Even today, with DeFi moving forward, people still choose the centralized destination. Despite the existence of decentralized exchanges (DEXs), many people prefer centralized exchanges (CEX).

The leading DEX in the market, PancakeSwap, currently processes transactions valued at $ 4.3 billion per day. On the flip side, the leading CEX, Binance, operates nearly $ 29 billion in trading volume in 24 hours.

24-hour Binance volume at press time | Source: CoinMarketCap

The continuing demand for centralized investment opportunities, which is evident in the sky-high demand for ETPs and CEXs, testifies to the age-old mentality of trusting centralized systems only because of their presence.

So nice Which is more suitable?

There is no such thing as “best fit”. Each investment option has its own advantages and disadvantages. Traditional and relatively “safe” options typically have limited growth, while digital assets can skyrocket more than 100% in a single day.

However, then they are prone to sudden liquidation, decreased demand and excessive volatility, leaving investors at a loss or even “empty”.

Even as trust in the decentralized system grows, centralized options will never go out of style. Because people always want to have a clear system in which to invest their money. For this reason, even investing through a bank is preferred by some.

Put simply, risk takers can therefore pursue traditional crypto investment options i.e. cryptocurrencies, NFTs, crypto-based companies, etc.

Safe players who want to get into crypto without taking undue risk can use safer investments like ETFs, GBTC, crypto-related companies, etc.

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